Posted
by
timothy
on Thursday April 05, 2012 @12:50PM
from the can't-leave-their-friends-behind dept.

Lucas123 writes "Major tech vendors are funding patent trolls, companies that derive the bulk of their income, if not all of it, from licensing huge libraries of patents they hold as well as by suing companies that use their patents without permission, according to an investigation by Computerworld. Tech companies — including Apple and Micron — have railed against patent 'nuisance' lawsuits, only to fund or otherwise support some of the patent trolls. Because of patent trolls, more politely called mass patent aggregators, patent litigation has in part increased by more than 230% over the past 20 years. 'Most of the major tech companies are backing a troll in some way, probably financially,' says Thomas Ewing, an attorney who has authored reports on what he calls 'patent privateering.'"

Unfortunately, it also stops people like a close relative of mine, who invented a new and useful mechanism for a common device (involving optics and high temperatures), but had no interest in developing the business around it himself, or dealing with the cutthroat competition in that particular industry. He sold licenses to the major manufacturers, recouped what he spent developing the mechanism (because lenses aren't cheap), and went back to his normal life.

The two are inseparable. Consider that you are Apple, or Google, or Microsoft, or really any big company. A patent troll comes to you and offers a chance to buy in to their patent pool -- you will gain a blanket license to their entire portfolio for only $500m, presented as an equity investment.

Your patent attorneys look through the pool and determine that, if they were to sue you on every patent they have a 50% chance of winning, the expected outcome is $750m. Even if you prevailed in every case, legal cos

The problem is obvious patents, not who owns and enforces those obvious patents. All big tech companies own and enforce obvious patents, so how is this worse than companies that produce nothing doing the same thing? We need a fix to obvious patents. Shorter time limits for (de facto) software patents, and peer review are the only workable solutions that have been proposed.

The problem is a lot more fundamental and deep-rooted than what you have described. The short time limits, lack of proper reviews are symptoms of the problem. The real problem is the people, the incentives and the fundamental lines on which our world operates. The majority of the world operates not based on the drive to create something, the passion for perfection but rather on making money and gaining fame.
Also, we don't understand ideas very well. Where do ideas come from? Do they belong to the person who got them? What if multiple people had them at the same time, whether in close proximity of location or in different parts of the world. Who would they belong to then? To the person who gets the patent? Should they really belong to someone, or the person who happens to get the idea first should only get a small part of the attribution?
Who is making the decision to fund patent trolls? The executives sitting in a boardroom. Who is supporting these decisions? Everyone who is a stakeholder - all top level execs as well as senior/middle mgmt as well as stock option holders. Again, incentives supplanting principles/values.

No, the problem is non-practicing entities holding and enforcing patents. A practicing entity - a real company - has an incentive to not troll with its patents. Trolling with its patents would be painting a big target on its ass, as Apple and Yahoo are starting to find out. What does a non-practicing entity have to fear from trolling? No liability at all. It doesn't do anything!

While I agree that obvious patents suck, it's much harder to separate obvious from non-obvious. The USPTO doesn't inspire me to believe that it could ever fix the problem adequately. In comparison, it would be rather easy to say that non-practicing entities cannot bring patent claims.

Unfortunately there's no good way to define practicing versus non-practicing. Is a law firm that employs some pimply-faced script kiddie who writes phone apps now a practicing entity? I think the real solution is to eliminate software and business process patents, they're like an architect patenting the idea of putting a window in an office at a specific location. Big deal.

You've recognised yourself that that's an extreme solution to the problem, and I can't help but think that such a solution would do infinitely more harm than good.

One of the stronger arguments for the benefits of a patent system is the notion that it helps correct the market imperfection which would result in the absence of intellectual property rights, where (for non computer-implemented inventions) he who holds the manufacturing and distribution capabilities can effortlessly muscle out your little guy who

Unfortunately there's no good way to define practicing versus non-practicing. Is a law firm that employs some pimply-faced script kiddie who writes phone apps now a practicing entity? I think the real solution is to eliminate software and business process patents, they're like an architect patenting the idea of putting a window in an office at a specific location. Big deal.

I say, force the NPEs to do exactly that. It will a) force them to spend money - thus causing a slight but important barrier to trolling, b) increase employment (negligible but a worthy goal), and most importantly, c) if by some luck the troll actually creates an app/product that has sales, it would be put in exactly the position that practicing entities have - ie, having a stake and exposure to counter-litigation.

In short, forcing even a sham of practicing in the areas where they litigate will likely kill

Unfortunately there's no good way to define practicing versus non-practicing.

Not at all. A patent owner that really is trying to "promote the useful arts and sciences" is either trying to bring an implementation of the claimed invention to market, or is offering the patent for licensing. Virtually all patent trolls could be taken care of by requiring the plaintiff to show that they have made a good faith effort to do one of these two before they can bring a suit for infringement.

A practicing entity - a real company - has an incentive to not troll with its patents.

That disincentive only works for large companies with similar patent warchests. Small companies, end users etc. can get just as screwed by a practicing entity, since they have no or few patents. What are you going to do when someone sues you for patent infringement if you use Facebook? [groklaw.net] What are you going to do if you really do invent some new technology, say a new graphics pipeline rendering technology? Do you think that Nvidia would hesitate to take you down with their patent warchest to take you down if y

If anyone accuse you of patent infringement, check the patent calmly. If the patent is something obvious like "I invented the rounded corners", shoot the lawyer (twice, for sure) and send his head (only the head) back to the owner of the "patent", and repeat this until the owner of the "patent" runs out of lawyers.

And if this rate of increase continues into the future, where it approximately doubles every ten years, in 2020 we'll be 400% higher than 1990 and in 2030 we'll be at 800% and by 2040 we'll be at 1600%...

As far as math goes, that's all fine. But behind those numbers we have to put resources, and resources come from meatspace, where there are physical limits to growth. In the finite world, continuous growth is just not sustainable. And even if it were, is this where we want to dedicate our resources?

A 4.2% compound growth rate is not a doubling every ten years. Simply just apply the rule of 70 and you find it's 16.7 years.

And even that math isn't that great because it doesn't factor in the overall US economic growth rate of 2.5% over the past 20 years or so. So really the excess patent rate is 1.7% per year compared to the overall economy. That's a doubling every 40 years.

And that's the overall growth rate, which is not as fast as the growth rate of the technological components of the US economy.

I'm not sure I buy your adjusting the rate of litigation growth by the rate of economic growth or widget growth - doesn't seem mathematically legit to subtract dollars or widgets from # of court cases. But maybe a graph comparing such things would be interesting.

Because of patent trolls, more politely called mass patent aggregators, patent litigation has in part increased by more than 230% over the past 20 years

The number of patent cases has increased almost exactly in lock step with the number of patents granted [pwc.com] (see page 8). The growth rate for litigation since 1991 is 4.9%, whereas the rate for patents granted is 4.5%. There is not a lot of evidence that there are more patent cases because of non-practicing entities. For example, litigation rates have been relatively flat since about 2003, despite numerous patent aggregators only coming into existence in that timeframe (see page 8 again).

NPEs also tend to lose cases more often than practicing entities (see above, page 24 and 32). NPEs win about 23% of the time overall, and PEs win about 39%. When NPEs do win the awards are higher, but that's to be expected. The primary value of litigation for an NPE is to get money, either as a damage award or as a license agreement. The primary value of litigation for a practicing entity is to exclude a competitor. Damages are nice, but the real point is the injunction.

That loss rate is a good example of why more fee-shifting (i.e. loser pays the other side's attorney's fees) in patent cases would be beneficial in eliminating frivolous, "shakedown," and otherwise questionable patent suits brought by NPEs.

Due to selection bias, such numbers say very little. If a case would be obviously won - in either direction - then it will most likely be settled instead of going to court.

"Would be obviously won" applies to very few pre-litigation patent disputes. One look at the reversal rates at the Federal Circuit would be enough to tell you that, to say nothing of the uncertainty created by Supreme Court decisions, Federal Circuit en banc cases, and the America Invents Act.

Anyway, are you suggesting that NPEs have caused a significant increase in out-of-court patent disputes all involving either obviously strong or obviously weak patents? If the patents are that obviously weak, then wh

Due to selection bias, such numbers say very little. If a case would be obviously won - in either direction - then it will most likely be settled instead of going to court.

"Would be obviously won" applies to very few pre-litigation patent disputes. One look at the reversal rates at the Federal Circuit would be enough to tell you that, to say nothing of the uncertainty created by Supreme Court decisions, Federal Circuit en banc cases, and the America Invents Act.

These numbers can't be drawn conclusions from either; they have similar types of bias.

Anyway, are you suggesting that NPEs have caused a significant increase in out-of-court patent disputes all involving either obviously strong or obviously weak patents? If the patents are that obviously weak, then what's the problem? And if the patents are so obviously strong that the defendants don't bother going to court, then it sounds like there's not a problem with NPEs abusing weak patents.

And if there had been such an enormous swell in the number of out-of-court patent disputes one would expect significant spillover into the courts because of close cases. Remember that an alleged infringer can easily drag the patentee into court via a declaratory judgment action. In fact, it is almost impossible to discuss a license agreement without triggering declaratory judgment jurisdiction. So it's not like the NPEs have complete control over whether a dispute ends up in court; far from it, in fact.

I'm only suggesting not drawing conclusions from numbers that have significant bias in them. In this case, I think the conclusion is right but the inference is wrong.

In more depth:

I believe the quality of software patents is horrible; and I believe both PEs and NPE mostly play with patents that should never have been issued. However, agreeing with the conclusion doesn't make me agree with the way it is argued - I want my

"Winning" means that a patent is found valid, enforceable, and infringed. NPEs can lose not just because a patent is invalid but also because it was simply uninfringed. Fee-shifting could apply in either case, of course. Without more detailed statistics it's impossible to say whether the PTO is "rubber stamping" too many invalid patents.

Furthermore, "rubber stamping" is a pretty big overstatement. The PTO might not be doing a very good job of examination, but it's clearly not rubber stamping patent appl

The way patents work almost forces companies to pursuit the aggregation of huge numbers of senseless patents. How else can a company defend itself against companies doing exactly the same and suing the shit out of them? The patent trolls are not the ones to blame - the problem is the legal framework around patents that allows "trolls" to exist in the first place and build a profitable business on it.

Chart 6d on page 22 [pwc.com] shows that patent trolls (non practicing entities) receive vastly higher damages in software. The median for software is ~$143, while that for the runner-up (computer hardware) is ~$48.

Combine this with unavoidability of accidentally using obvious software patents and you can see why there are only a few big players that control the software market.

Chart 2c shows that the Lucent got awarded over $1500 million in damages from Microsoft for MP3 techology. I was not aware of this case from